DAL ASSIGNMENT 1
Pedigree vs. Grit: Predicting Mutual Fund
Manager Performance
Submitted By:
Vasantada Srikanth
Roll No: 2016PGP423
Section: A
Question 1
A) Although the R2 value is low (4.33%) it does not mean that the regression is wrong.
The p-value of the regression is 0.0002445 which is less than 0.05 and the F value
4.839 exceeds the critical F value of 1. So the regression is statistically significant.
B) When two variables in a regression model have high level of correlation (above 90%)
between them, meaning that one can be linearly predicted from the others with a
substantial degree of accuracy. In this situation the coefficient estimates of the
multiple regression may change erratically in response to small changes in the model
or the data. In these cases regression will have high R square value but regression
model will be wrong. This is called as Multi Co-linearity problem.
C) From the Plot “Residual vs Fitted Values” graph, we can observe that there is no
specific pattern. If there is no pattern, then we can say that the relationship is linear.
So, relationship assumption is valid
Graph shows that variances of the error terms is not increasing or decreasing with the
